Attorney Fee Awards Without Winning

A recent case in NJ illustrates how, depending on statutory language, it might be possible to receive an award of attorney fees where winning is merely likely, but not assured. In Penna v. Newell Funding, which is presently in discovery (the long middle part of litigation where each side gathers facts about the other) the Court recently issued an order awarding attorney fees based, not on the final resolution for the case or as a sanction against one of the parties, but based upon the plaintiff winning a preliminary injunction.

A preliminary injunction is a form of equitable relief where the court issues an order aimed at preserving the status quo until the conclusion of the litigation. For example, in a case arising out of a pending foreclosure, a preliminary injunction might suspend the foreclosure process. Typically, to win a preliminary injunction you must show that: (1) absent the injunction, you will be damaged in such a way that a monetary award later will not make you whole; (2) no harm will result from the issuance of the injunction that is greater than the harm that will be prevented by the injunction; and (3) there is a substantial likelihood that you will prevail on the merits of the case.

In Penna the plaintiff won a preliminary injunction in a case predicated on New Jersey’s Consumer Fraud Act. The Court determined that winning the injunction qualified as the sort of equitable relief that would justify awarding attorney fees under the statute. The Court was aided in its decision by the fact that the award of a preliminary injunction carried with it a determination that plaintiff was likely to prevail on the merits at the end of the case. The Court awarded all fees incurred from the beginning of the case until the preliminary injunction.

Such rulings, if upheld, will further shift the economics of litigation brought under consumer protection laws.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Attorney Fee Recovery and the Federal Consumer Credit Transaction Laws

The federal consumer credit protection code, at 15 U.S.C. 1640(a)(3), provides for attorney fees as part of the recoverable amount for any violation of Parts B, D, or E of Subsection I of the code. (These code sections are parts of what is referred to as the Truth in Lending Act.) Part B deals with disclosures in consumer credit transactions and runs from 1631 to 1651. Part D deals with credit billing and runs from 1666 to 1666j. Part E deals with Consumer Leases and runs from 1677 to 1677f.

Although granting attorney fee to a prevailing plaintiff is mandatory, the court has discretion as to the amount of fees awarded. That said, courts have acknowledged that the purpose for awarding attorney fees is to make the plaintiff whole and encourage private enforcement actions. Attorney fees are quantified based on a reasonable hourly rate and a reasonable number of hours for work necessary to plaintiff’s representation. Plaintiff’s actual obligation to pay the fee is not a factor. Since a Plaintiff might be found to have prevailed on its action even where a cases settles, defendants should make sure settlements specifically address the attorney fee issue.

Things that can put a business at risk under the above laws (and this is a very abbreviated list) include:

(1) Failing to adhere to the ways in which certain kinds of disclosures need to be labeled and formatted (15 U.S.C 1632).

(2) Failing to properly disclose the consumer’s right to rescind a consumer credit transaction within three days of its formation (15 U.S.C. 1635).

(3) Violating the disclosure requirements associated with an open ended consumer credit plan (including with respect to solicitations, opening accounts, renewing accounts, changing terms/rates, and furnishing statements, (15 U.S.C. 1637), with additional rules if the plan is secured by the consumer’s principal dwelling (15 U.S.C. 1637(a)).

(4) Violating the disclosure requirements associated with a non-open ended consumer credit transaction (15 U.S.C. 1638), with other specific disclosure requirements for certain mortgages (15 U.S.C. 1639).

(5) Violating the disclosure requirements associated with reverse mortgages (15 U.S.C. 1648).

(6) Violating the rules governing the handling of alleged billing errors. (15 U.S.C. 1066).

(7) Violating the rules governing the return of credit balances (15 U.S.C. 1066(d)).

(8) Violating the prohibition against credit card tie in services (15 U.S.C. 1666(g)).

(9) Violating the prohibition against offsets to pay credit card debt (15 U.S.C. 1666(h)).

(10) Failing to adhere to rules governing rate increases and amortization for credit card accounts (15 U.S.C. 1666(i)).

(11) Violating the rules governing disclosures in a consumer lease (15 U.S.C. 1667(a)).

(12) Violating the rules governing consumer liability at the termination of a lease (15 U.S.C. 1667(b)).

(13) Violating the rules governing disclosures in advertisements for consumer leases (15 U.S.C. 1677(c)).

Violations of the consumer credit protection code carry statutory penalties in addition to actual damages. Such penalties, including liability for the plaintiff’s attorney fees, can be triggered by unintentional violations even where the plaintiff has not incurred any actual damage. Moreover, violations may be the product of faulty procedures applied systematically across many transactions, making great fodder for class actions—especially if the class does not have to dilute their recovery to pay attorney fees.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Attorney Fee Recoveries in Federal Consumer Product Warranty Cases

Chapter 50 of the federal commerce and trade laws, which starts at 15 U.S.C. 2301, sets certain standards that must be followed by suppliers, warrantors and service providers with respect to warranties, implied warranties and service contracts. Section 2310 (d) (2) of the Chapter provides that a prevailing consumer under in an action brought under Section 2310 (d) (1) may be awarded reasonable attorney fees as a part of their recovery. First I will discuss the kinds of consumer actions that are covered by this provision, and then I will discuss the parameters of the court’s discretion to grant or not grant attorney fees to the prevailing consumer.

The Attorney Fee Recovery provision applies, with a few carve outs, to any action by a consumer who has been damaged by the failure of a supplier, warrantor, or service provider to comply with an obligation under the Chapter or under a warranty, implied warranty or service contract.

The carve outs relate to a warrantor’s informal dispute settlement procedures and the opportunity to cure defects. The first carve out states that warrantors are allowed to establish informal procedures for solving warranty disputes that the consumer must follow before taking the warrantor to court. These procedures must meet standards established either directly in Chapter 50 or through the Federal Trade Commission. Therefore, where a valid informal settlement procedure is established, it must be followed before the consumer can proceed in court. The second carve out states that, before initiating a legal action, the consumer must allow the entity obligated under a warranty, implied warranty, or service contract a reasonable opportunity to cure any defect in their performance. (In either case, a court may allow a class action to be filed, and the procedure to determine the representative capacities of named plaintiffs to go forward, as exceptions to the carve outs.)

As to the court’s discretion to grant or not grant attorney fees, a sample of the case law shows the following: (1) there must be proof that the actual fees were expended (or that the specific work from which a reasonable fee was calculated was done); (2) the first mention of a demand for fees cannot come in a post trial motion (it should be inserted in the pleadings); (3) fees will only be paid for prosecuting causes of action brought under Chapter 50 that result in a judgment for the consumer (no fee awards for work done on dismissed causes of action or causes of action not authorized by Section 2310 (d) (1)); (4) settlements should explicitly state how attorney fees are to be handled; (5) only a prevailing consumer (not a prevailing defendant) can be awarded fees under section 2310 (d) (2); and (6) courts may limit attorney fees based on any determination that they are excessive (including the amount of the fees in proportion to the amount of damages) or may allow fee accelerators for high value/high risk cases.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Attorney Fee Recovery in Product Safety Whistle Blower Cases

Last week we looked at the federal code governing consumer product safety and the opportunity to recover attorney fees in cases arising out of safety violations under that code. This week we look at the opportunity to recover attorney fees in the event of related whistle blower litigation. This is a relatively new statute that lacks a body of case law to aid in its interpretation. Therefore, we will limit our review to a straight forward reading of he statute’s text. Though not within the scope of this blog entry, a person trying to predict what the courts will do with the statute would be well advised to seek out opinions under other, similarly worded, federal whistle blower statutes.

The salient point of the statute is that an employer may not treat an employee adversely as a result of the employee: (1) bringing attention to a violation of the Consumer Product Safety Act; (2) cooperating in an investigation or prosecution arising out of the Act; or (3) refusing to participate in or advocate a violation of the Act, or the hiding of a violation of the Act. 15 U.S.C. 2780(a). An employee so victimized has very little time—180 days from the adverse treatment—to file a complaint with the Secretary of Labor. 15 U.S.C. 2780(b). The Secretary shall undertake an investigation as described in the statute and, if it is determined that the whistle blower statute has been violated, order relief in he form of: (1) compensatory damages; and, (2) restoration of the victim to the position they would have been in but for the violation. The Secretary shall also award the victim all costs and expenses including attorney fees and expert witness fees, as determined by the Secretary. 15 U.S.C. 2780(b)(3)(B).

An employee considering action under this statute should, however, exercise caution as the statute can also provide limited relief for the wrongfully accused employer. Specifically, in the event the Secretary determines that the complaint was brought frivolously or in bad faith, the Secretary may award the employer reasonable attorney fees up to $1,000, to be paid by the complainant.

Notably, if the Secretary does not reach a determination within 120 days of the complaint, the complainant is free to pursue the above described relief (including attorney and expert witness fees) through the federal district courts—including, if requested, through a jury trial. 15 U.S.C. 2780 (b)(4).

Orders issued by the Secretary, pursuant to this statute, are themselves enforceable through the federal courts and attorney fees are also recoverable in those enforcement actions, by any party if the court so directs it. 15 U.S.C. 2780(b)(7)(B).

As in the case of countless other statutes, beware of the exceptions. The very last part of this statute excepts (maybe not all but a wide swath) of employers from any liability under the statute for the undirected violation of rogue employees.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Attorney Fee Recovery and Violations of the Consumer Product Safety Improvement Act

The Consumer Product Safety Improvement Act, set forth in the federal code at 15 U.S.C. 2051 to 15 U.S.C. 2089, sets forth various rules governing product safety for various categories of consumer products (basically all consumer products less some very substantial exceptions set forth in the code’s definition of “Consumer product” at 15 U.S.C. 2052). The rules in question require the disclosure of information regarding consumer products, mandate certain kinds of labeling for products, create performance requirements and ban certain products, or prohibit certain substances (or certain concentrations of substances) in products. Examples of product controls include prohibitions of lead paint in children’s toys, warnings on ATV vehicles, and procedures for registering the users of certain types of products in the event of a recall. The Act also created the Consumer Protection Agency, which is the body that promulgates most of the specific consumer safety rules that are enforced through the Act. For a better understanding of the Commission’s work, you can visit its website at www.cpsc.gov.

Section 2072 of the Act provides that any person who is injured “by reason of any knowing (including willful) violation of a consumer product safety rule, or any other rule or order issued by the Commission may sue any person who knowingly (including willfully) violated any such rule or order…” Further, if the plaintiff prevails and is awarded a sum in excess of $10,000, the plaintiff “may, if the court determines it to be in the interest of justice, recover the costs of suit, including reasonable attorneys’ fees … and reasonable expert witness fees.” (Costs, but not fees, could get shifted the other way in the event that a judgment exceeding $10,000 is not achieved.) Attorney fees are not recoverable if the defendant is the United States or any of its agencies, officers or employees who are sued for their actions or inactions in their official capacity.

As these remedies are in addition to those provided by any other federal or state law, it could serve product defect plaintiffs well to see if their state tort case also qualifies as a violation of this Act. Be aware that the case law regarding this section of the Act is sparse, the Act has its own pleading requirements in addition to what is necessary for a state common law action, the act does not provide for punitive damages, and availing yourself of the Act will put you in federal court.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Business Protections in Consumer Protection Laws

Not all consumer protection laws protect only non-commercial consumers. Some also protect businesses and, therefore, present an avenue for collecting attorney fees in situations where no such relief would be available in a straight forward breach of contract action. An example of this is found in New Jersey in a grouping of statutes titled “Frauds, Etc., in Sales or Advertisements of Merchandise,” which is more commonly referred to as the “Consumer Fraud Act,” or “CFA.

Among other things, the CFA provides, a cause of action for “unconscionable commercial practice, deception fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission of any material fact with the intent that others rely on such concealment suppression or omission, in connection with the sale or advertisement of any merchandise or real estate ….” Notably, unlike a cause of action for common law fraud, reliance on the deceptive behavior need not be shown before recovering damages under the “CFA.”

A prevailing CFA plaintiff (which includes a defendant that raises a CFA action as a counterclaim) will be awarded triple actual damages and costs of suit, including attorney fees. This can be good news for businesses as well as individual consumers because New Jersey state courts have held that the CFA does not exclude business from the protected class. Rather, the key determination as to a plaintiff’s ability to seek relief under the CFA rests on whether the transaction complained about goes to the sale or advertisement of merchandise or real estate, and whether the thing sold was offered for sale to the general public. In that regard, the purchase of a new franchise (but not of an ongoing business) and renovation services purchased by businesses have been found to fall under the CFA.

The take away point, is that business looking at a breach of contract action, where the contract does not provide for an award of attorney fees, should check to see if they can take advantage of the consumer protection law of their jurisdiction. If they can get into federal court (on diversity jurisdiction) they should see how the statute is interpreted in both the state and federal courts, because the state courts and federal courts will sometimes interpret the state’s laws differently. For example, federal courts in New Jersey are less likely than state courts to allow business to bring an action under the CFA.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

More on the Pennsylvania CPL

In my last Blog entry, I mentioned that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (the “CPL”) offered relief, including an award of attorney fees, in the event a consumer suffers damages as the result of any of 21 wrongful acts that are listed in the statute. In this Blog entry, I briefly summarize what those acts are. For the sake of brevity, I combined certain of the acts and paraphrased the language in the statute. To determine exactly what protections are afforded under the statute you should, of course, consult an attorney. That said, here is my abbreviated list of the wrongs for which consumers can seek redress under Pennsylvania’s CPL:

1) Deceiving the consumer as to the identity of the maker or provider of the goods or services, or as to the identity of persons or entities affiliated with or endorsing the goods or services, or with respect to the geographic origin of the goods or services.

2) Passing off new or refurbished goods as new.

3) Advertising goods of services with an intent to not sell them as advertised (including an undisclosed limitation of the quantity available at the advertised price or terms).

4) Disparaging another’s goods or services through false or misleading representations.

5) Making any other false claim about the nature or benefits of goods or services.

6) Offering future credits, at the time of a sale, for bringing in additional buyers following the sale.

7) Facilitating Chain Letter or Pyramid Schemes.

8) Not honoring a guarantee or warranty.

9) Knowingly misrepresenting the need for services, replacements or repairs.

10) Making improvements, repairs or replacements that are of lesser quality than agreed to in writing.

11) Making telephone solicitations that do not properly identify the caller, the purpose of the call, the thing being offered and, if the is an opportunity to win a prize, the fact that no purchase is required to be eligible to win the prize.

12) Offering any contract that includes a clause whereby the consumer gives up the right to assert a defense.

13) Soliciting mail or phone sales without reasonably believing that it can ship anything purchased to the buyer when promised or, if no promise is given, within 30 days.

14) Making any misleading representations or omissions conserving rustproofing with respect to the sale of new automobiles.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.

Consumer Protection Laws

It is quite possible for a matter to be too complex for a plaintiff to pursue it without an attorney, too small (in terms of the possible recovery) to justify an attorney taking the case on a contingent fee basis, and too large for the plaintiff to not be seriously affected by the loss.

To help alleviate this situation, at least with respect to disputes arising from consumer transactions, many states have enacted general consumer protection laws. The law serving this purpose in Pennsylvania is the Unfair Trade Practices and Consumer Protection Law, (the “CPL”). Among other things, the CPL provides that, when a person “purchases or leases goods or services primarily for personal, family or household purposes” and suffers a loss for one of 21 specific reasons listed in the statute, that person will receive an award of damages of at least $100 (even if actual damages are less, and without an upper limit if damages are more) and may receive an adjustment to the award of up to 3 times damages and “costs and reasonable attorney’s fees.”

In determining how much attorney’s fees are reasonable, the court considers: (1) the magnitude of the effort and skill required to properly conduct the case; (2) the customary charges for similar services by other attorneys it the area; (3) the amount at stake and the benefit resulting to client; and (4) the risk taken in pursuit of the case. In balancing these factors, it has been found by Pennsylvania courts that attorney’s fees of between 11 and 12 times actual damages can be reasonable. However, Pennsylvania courts have also found attorney’s fees of between 3 and 4 times damages to be unreasonable. It all depends on the facts and circumstances of the case and on how the court works through the above factors

When balancing the four factors, courts will look more kindly on a large fee request where plaintiff has actually paid the fees and seeks reimbursement. Courts will typically be less generous where the fee was contingent, with the fees only being paid to the extent they could be recovered under the CPL. Though the contingent nature of an attorney’s fee does not make it unrecoverable, it will draw closer scrutiny from the court. It should also be noted that the court will reduce an award of attorney fees proportionately by the amount of effort the attorney spent pursuing legal theories outside of the CPL.

Finally, as you might have noticed, attorney fees under the CPL go to the prevailing plaintiff, not the prevailing defendant. If a prevailing defendant wants to pursue the costs of defense, it will have to look elsewhere for the authority to do so. Possibilities include: statutes, common law and rules governing claims made in bad faith, abuse of civil process and, if applicable, the express terms of an underlying contract.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.